Erik Hoffmann of global energy and commodity price reporting agency Argus Media on Friday (17 July) published an update on how narrowing bunker price spreads have negatively impacted new orders for scrubbers using Finnish company Wartsila as a case study:
New orders for marine-exhaust scrubbers have fallen sharply, as price spreads between high- and low-sulphur fuels have narrowed since peaking at the start of the year.
The world’s largest scrubber manufacturer, Finland’s Wartsila, said the value of its new orders fell by 40% in the second quarter from a year ago, to €119mn ($136mn) from €198mn.
Lower scrubber sales contributed to the firm’s profit, which fell from €62mn to €23mn over the same period. Wartsila said narrow sulphur spreads, as a result of falling oil prices during the Covid-19 pandemic, has prolonged payback times for scrubber investments and curbed demand for the exhaust-cleaning systems.
Installing a scrubber enables a ship to continue to burn 3.5% sulphur fuel oil beyond the the International Maritime Organisation (IMO) 0.5% sulphur cap that came into effect on 1 January.
Wartsila received more scrubber orders in the second quarter than it did in the first, but both periods were significantly weaker than a year earlier when several oil and shipping companies forecast spreads of $250-300/t between high- and low-sulphur fuels. The spread between 3.5% fuel oil and the IMO-compliant 0.5% fuel oil peaked during high bunker demand for compliant fuel at the start of the year.
In the world’s biggest bunkering port, Singapore, the premium has narrowed by 83% since its widest on 2 January, from $370.50/t to $61.50/t yesterday. In Fujairah, UAE, the premium has come down by 81% since it peaked on 30 December, from $497.50/t to $97/t yesterday. The spread has narrowed the most in Rotterdam, where it has dropped by 85% from a high of $309.50/t on 30 December to $46.50/t yesterday.
Wide sulphur spreads have been the main selling point to shipowners looking to save fuel costs by retrofitting scrubbers on ships to burn the cheaper 3.5% fuel oil. Wartsila received substantially fewer orders for retrofitted scrubbers, and orders for scrubbers on newbuilds were also lower.
About 4,270 vessels will have scrubbers fitted or on order this year, according to shipping classification society DNV GL. Only around 150 have been ordered for 2021 and 2022, and 72% of these are for retrofits. Wartsila has a market share of 13%, with 560 scrubbers fitted or on order.
Photo credit and source: Argus Media
Published: 20 July, 2020
Webinar will offer delegates insights on the prevention of operational issues when using VLSFOs, along with an update on biofuels and bunker fuel quality trends for 2021 and its forecast for the current year.
Heating VLSFOs to prevent cold flow issues causes issues related to distillate ageing, and there is a gentle balance to be maintained when handling the product.
Research into n-paraffin distribution of VLSFOs has shown that they not only differ from MGO, but significantly differ from each other as well, states bulletin.
Bunker Holding and Dan-Bunkering have decided not to appeal the city court ruling in the case where the companies were on trial for breaching EU sanctions against Syria, states USTC.
Poll shows market participants think Singapore’s future as a bunkering hub in the near term will be impacted most by growth in alternative bunker fuels and intensifying competition from other ports in Asia.
‘We will now take the necessary time to consider and evaluate the verdict and the premises of the verdict thoroughly before making any decision of whether to appeal to a higher court,’ informs company.